Ask VeraSage: A Majority of Our Customers Don’t Want Value Pricing?


Long time ago you answered my Carthage question and with my current company we tried a few times to sell fixed price packages.

Some clients bite it although many ask us to switch to the hourly rate. What I observe is that it’s easier (read, they’re used to) for the clients to get quotes and compare hourly rates than match and analyze various criteria from different service providers. Sometimes it gets even worse: the client wants an hourly rate but at the same time to cap the SOW [Scope of Work] with the total allowed maximum sum.

That leads to the very same ethical issue when project managers effectively get the red line and mentally the mission to bill the client as close from the bottom to the limit as possible. I tried to put all the cards on the table: propose the hourly-based project plan, come up with the estimation and then bid with the fixed price which is lower? Surprisingly even in such cases some clients ask for the hourly rate motivating that they can easier pass it through the budgeting group and legal.

I’m ready to accept the hypothesis that we run into the clients which don’t understand the value-selling benefits, maybe we don’t articulate enough, maybe they don’t trust the approach for some reason but certainly in our case such clients are majority in our pipeline.

What do you advise to undertake?

[Name Withheld]

Hi [Name Withheld],

I think the last part of your fourth paragraph answers your question.

It’s obvious the firm isn’t doing an effective job articulating its value proposition—by that I mean, comprehending, communicating, and convincing the customer they must pay for value.

Don’t despair, this is common, though not to the level your letter seems to suggest. It’s usually a minority of customers, not a majority as you say.

You need to stop talking about hours completely, and just tell your customers you don’t price that way. It’s unethical.

No client can tell you how to price—that is your decision. Also, your firm doesn’t do timesheets or track time. You have better things to have your knowledge workers do—such as add value and provide outstanding customer service to customers. Then what will the customers say who want to see hours? Force you to do timesheets? Then they aren’t the right customer.

If you’re not willing to do the above, Pricing on Purpose will never become a core competency in your firm. There’s simply too much empirical evidence from all the firms out there that customers love this approach. The push back we get is from firms, not customers. I know this for an absolute fact, since I’ve spent the last four years speaking to customers across all professional firms and they all say the same thing: they want certainty in price, period. It’s how they buy everything else.

Do you have people pricing and selling who aren’t good at it? Then upgrade their skills or remove them from pricing.

Blaming it on the idea that your customers don’t prefer fixed pricing is a cop out and simply doesn’t comport to human behavior and the laws of economics.

The only other thing I can think of is your customers do not trust you; and that’s not a pricing problem. That’s much deeper. I hope this is wrong?

Either you want to do this or you don’t. Your customers are not an excuse.

I hope that helps.

Of course, we welcome the thoughts from other firms that have made the transition from hourly billing to Value Pricing.


  1. I was hoping that was going to be your response Ron. For many years now, I have seen the client dictate our office processes and it always ends in disaster. When I sit down with a new client, the first think I communicate is, I am not a traditional CPA firm. Then I give them my speech. I have had positive results with this approach. The days of client reaction “fear” are over. Since trashing the timesheet on 1/1/10, we had one client demand we bill by the hour. We completed the 2009 engagement, and due to unreasonable demands of the client, we have since fired them. It felt great!

  2. Matthew Tol says:

    We’ve been sans timesheets now for 3 years. Our customers understand this and love it. It did take some time to get ourselves over the line and then the customers, but it is worth it.

    A lot of it comes down to confidence, persistence and articulating the process to the customer – if you don’t “get it”, then then is no way you’re going to be able to pass it on to your customers. If you let them know that this is another reason why you’re in the leading pantheon of professional businesses out there and you like to deal with customers who are in a similar position in their industry to where you are in yours, the reaction is often very positive (!)

    Keep at it and set your goals – let the customer know what your goals are and educate them on why timesheets are an unnecessary evil – it will cement a very positive relationship for years to come.

  3. Is a menu of services a tool to help a firm value price up front?

    With multiple pricing options for added services to the menu items?

    I really want to transition away from timesheets, and we have done so when it comes to pricing, packaging and billing. We still use the timesheet as a management tool though. I have a feeling we are measuring the wrong thing by measuring productivity percentages.

    What is the best team member measuring stick in a firm with no timesheets?

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